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I'd like to thank Credit Union Journal for your very insightful article on service to people of "modest means" (CUJ Feb.26). Quite honestly, I have gotten frustrated by the arguments offered by the leader of middle class organizations that are quite removed from large numbers of Americans that have traditionally been neglected by financial institutions. Perhaps it's time that we begin to consider other perspectives, including from those that are committed to serving the disenfranchised in our society.

I've been director of El Futuro Credit Union for about a year and half. I actually came out of retirement to take the position. I was primarily motivated by the credit union's unique story, and its potential as a community development credit union to make a difference in one of the poorest communities in our country. From the onset, it became clear that this credit union was different from other financial institutions, and was truly people centered. While I have learned to appreciate the value of the cooperative spirit, I have gained an even greater appreciation for its value to low-income communities. Thus, I feel somewhat compelled to give my perspective on this issue.

EFCU was started over 40 years ago by immigrant farm workers in response to the failure of local financial institutions to provide access to basic financial services in our community. We have evolved over the years as a unique organization in the San Joaquin Valley. Different than most credit unions, approximately 80% of our 3,500 members are at or below the poverty level, 70% immigrant farm workers and 95% Hispanic. This information is important since it makes us an intricate part of the debate concerning service to people of "modest means."

Serving The Working Class

It cannot be negated that credit unions were first organized to serve the working class. When the law was first enacted, working class represented laborers, factory workers, miners, and service workers that had historically been subjected to considerable exploitation, especially when seeking financial services. Banks at the time primarily served the upper class, business sector and a small emerging middle class. It's also understood that the majority of Americans were in the working class, or what is now considered the working poor. Ironically, it is the latter group that is being ignored in the current debate. The working class represented those that had traditionally been neglected by financial institutions. Quite simply, credit unions were organized to address a special societal need, as had occurred in other parts of the world. Logically, they were given a special status. Many now hold that the industry has lost this historical perspective.

During the recent debate on the issue of "modest means," the industry held that the term was synonymous to "Working Middle Class."

The industry offered a new definition that appeared to give credence to the status quo, while creating an historical disconnect with the notion of service to low-income communities. This is despite the fact that there has been more than a century of experience in addressing this issue.

I believe that Congressional intent on this issue is clear. This was clarified even further as a result of legislation in 1998 when Congress established a nexus between the industry's tax- exempt status and service to people of modest means.

The controversy is fundamentally easy to resolve. At the root of the issue is the universally accepted notion that credit unions were organized to serve all Americans. In addition, because CUs are exempt from taxation, they are obligated under an "implied social contract" to serve the broadest aspects of the American society, including the poor. This is implicit in the intent of the original Federal law in 1937 when it spoke to the industry's inherent obligation to help stabilize the credit structure of American Society. There was never any intent to make credit unions exclusive but rather to be inclusive in responding to society's financial needs.

The recent NCUA/GAO study revealed two salient points. The first is that there is a need for some level of accountability, and secondly, there is some evidence that banks have out-performed the credit union industry in serving low income communities. The industry contends that existing regulatory constraints have prevented the industry from being more proactive in serving low income communities. Although there is some basis for this argument, the industry has never really been limited in its ability to service low-income communities. In fact, 11% of the credit unions have from a 20% to 40% representation of Latinos in their area of service and it grows significantly when you include other ethnic groups. Disturbingly, there is ample evidence that the majority of low-income communities throughout the nation have been neglected by both the banks and credit unions and neither has particularly felt an obligation to serve these communities. Yet, because of its cooperative spirit, the credit union model is the more adaptive to serving poor communities. And, yes, it has to be recognized that the banks have been more proactive because of CRA.

CDCUs Filling The Need

The primary sector of the industry that has traditionally served low-income communities has been the Community Development Credit Unions (CDCUs). It is noteworthy that the first credit union in our country was organized to serve low-income residents. At the time, the credit union was seen as a flexible dynamic model that could adapt to the particular financial needs of low-income communities. Similarly, CDCUs have developed in this country in response to the local needs of underserved communities. Yet, many of these CDCUs have struggled for years to survive.

In the 1960s, NCUA and the Office of Equal Employment Opportunity formed a partnership to organize credit unions in many of the low-income communities in the country. Hundreds of CUs were developed, only for most to be forced into liquidation or to merge with larger credit unions. The bottom line is that these CDCUs received little or no support from the industry. Today, many of the CDCUs face similar situations. In our own case, we have struggled to maintain capital, build capacity and to meet the strict mandates of regulatory requirements. Despite regular overtures to other CUs for assistance, the response has been piecemeal and limited. Even with our special focus and limited resources, we are seen as competition, rather then a valued part of the equation that complements the industry.

Yes, credit unions are first and foremost a business. Yet they have a special status that can't be ignored. To do so is proving to be detrimental to the future of the industry. Truly, the issue isn't the definition of "modest means." But rather, it is whether we are serving the broadest aspects of American society by making credit union services available to everyone and whether the industry has provided "stability to the credit system of the United States." If we take the issue out of the political arena, and follow good common sense, the industry will always be consistent with its own essence and the intent of Congress. Implicitly, the industry should look within itself for solutions. The CDCUs are not an aberration, but a valuable part of the solution that should not be neglected. They give hope and a future to low-income communities and continuity to the industry and to any definition of "modest means." They represent our other self and clear evidence that we deserve a special place in society.

Raul Pickett is CEO of El Futuro Credit Union, Porterville, Calif.

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